Uber Is Back for NYC Cabs as Taxi App Wars Escalate

The Flywheel taxi-hailing app. Flywheel is trying to work through existing taxi fleets to make smartphones the smoothest way to flag a yellow cab. Photo: Alex Washburn/Wired

The fighting has escalated again today in the great taxi app wars of 2012. But no matter who wins, you the humble passenger will come out on top in 2013.

This morning, “e-hailing” upstart Uber announced that New York City has agreed to a one-year pilot program that will allow passengers and taxi drivers to connect via smartphone apps. The move reverses earlier efforts by city regulators that led Uber to shut down its yellow cab service just six weeks ago.

At the same time, taxi-app startup Cabulous relaunched today as Flywheel and launched a new service that, unlike Uber’s, is trying to work with, rather than against, entrenched taxi industry players.

Outside of maps, few app categories have become as contentious in the past year as taxis. Uber has become the best-known of these companies by taking an ask-forgiveness-not-permission approach to upending the taxi industry. The industry has responded with lawsuits, and regulators have been cracking down, at least until today.

“Today, New York City’s government overcame its own reticence and overwhelmingly passed a plan to bring the nation’s largest taxi market into the 21st century,” Uber CEO Travis Kalanick wrote in a blog post today.

The crux of the controversy has been Uber’s decision to connect directly with individual drivers, and setting up its own pricing rather than working through existing cab companies under standard cab rules. The key regulatory question is whether Uber is simply a hailing app, the smartphone equivalent of waving your hand, or if Uber itself is acting as a de facto dispatcher, which would subject it to the same rules traditional taxi companies have to follow.

Unlike Uber, Flywheel has decided to work with existing taxi fleets rather than around them to get its app out to drivers.

“You don’t have to go break all the china in the china shop,” Flywheel CEO Steve Humphreys says. “We just find it’s more cost-effective to work with these guys.”

To date, about 2,000 drivers in about two dozen U.S. cities have Flywheel running in their yellow cabs, including more than 500 in San Francisco — about one-third of the city’s taxis, Humphreys says.

Flywheel’s app doesn’t work too much differently than others on the market, including Uber. The app identifies your location and shows you icons on a map of taxis using Flywheel nearby. You tap a button to request a ride, the app contacts the nearest available driver, and you watch on the map in real time until the cab pulls up to the curb. At the end of the ride, you pay using the app, too. In theory, it’s a slick, seamless process for rider and driver.

In my brief experience trying out Flywheel, the experience was slightly more clunky. The app didn’t identify my location precisely, which led the driver to pull up on the other side of the busy street, despite a note I’d tapped in explaining exactly where I was. The driver wasn’t well trained yet on the new app, and together we ended up working through the steps needed to let me pay using the credit card stored in the app.

Despite those rough patches, the premise behind Uber, Flywheel, and similar apps seems truly reasonable. The time-honored wave-your-hand-and-shout-“taxi” method of hailing a cab is a crapshoot for both rider and driver. The would-be passenger doesn’t know where cabs are, or if they’re available. Drivers depend on experience, instinct, and lore to pick the streets where they’re most likely to find fares. When they work as promised, apps like Flywheel remove the guesswork for both sides.

Flywheel, which lets riders pay using their smartphones, summoned this cab in San Francisco. Photo: Alex Washburn/Wired

Uber in particular has framed the concept of drivers’ idle time as a well of potential profit that smartphones are uniquely suited to tap. If an empty car equals money left on the table, the location-aware, peer-to-peer transparency of smartphones make possible offers the most efficient way to connect demand with capacity. Uber’s skill at making this pitch has made the company a Silicon Valley favorite.

But Uber doesn’t just want to make getting a cab easier. It wants to flip the industry upside down. Enabled by a cozy relationship with city governments, the Uber argument goes, the entrenched players will never release their grip on the status quo, so why not just circumvent them altogether through better technology put directly in the hands of individual drivers — and in the process take a cut?

“The dispatch services and apps in SF mostly work with one fleet at a time, which we think is silly,” reads an Uber blog post announcing the launch of its taxi service in San Francisco, adding “you shouldn’t need to worry about which fleet your taxi is from.”

That approach has angered cab companies and contributed to Uber’s trouble with regulators. At the same time, competitors have likely benefited from Uber’s more aggressive approach. Uber’s success has shown taxi companies that, like it or not, they must reckon with smartphones.

“I think that Uber has definitely raised the awareness in the category. And it’s raised the ire of the taxi cab industry,” says Rob Coneybeer, a managing director at Shasta Ventures and a major investor in Flywheel. “If I can get something from a company that loves me rather than someone saying publicly that taxi cab fleets are doomed, it’s a natural proposition for fleet operators.”

Uber didn’t immediately respond to messages seeking comment.

Venture capitalists like Coneybeer have poured more than $100 million combined into “e-hail” companies. Clearly they see apps as the future of the taxi industry. But the path between innovative technology and easy profits isn’t as clean in the world of taxis as it is in other industries.

Sanders Partee, president of Flywheel competitor Taxi Magic, which also works with fleets, points out that taxis are expected by citizens and the law to provide a civic service, not just hunt the highest fare. Imagine the little old lady who will end up paying just a few bucks for a taxi across her dense neighborhood to pick up her medicine, Partee says. Then picture the straight shot to the airport along the interstate, a $50-plus ride with a near guaranteed return fare. Those easy, high-paying fares subsidize a taxi company’s ability to pick up the little old lady, he says.

If drivers use apps to freelance outside the fleet system to cherry-pick the high-paying passengers for themselves, Partee says “the taxi cab industry will crumble from the inside because it won’t be able to support the civic duty of public use and necessity.”

“If you take the one-percenters out and put them all in Uber cars,” he says, “that money will be sucked out of the community, will be sucked out of the fleets, and won’t be able to provide that service to the community anymore.”

However the controversy shakes out — and the outcomes will likely vary from city to city — it’s hard to imagine that after a year of use in New York City passengers will allow taxi regulators to roll back the system to the pre-smartphone era.

In the process, riders will have a broad choice of apps to try to see who’s best at providing the transparency and convenience that older ways of hailing cabs just can’t match. Or we’ll discover that the promise of taxi apps doesn’t hold up at all. (I couldn’t get a cab yesterday in downtown San Francisco during rush hour using Flywheel, Taxi Magic, or Uber.) Either way, the decision by New York City regulators and the abundance of taxi app options means 2013 will be the year we all find out if flagging a cab becomes something you’ll do from now on with your smartphone rather than waving your hand.